Nufarm to cut 105 jobs, shut manufacturing plants

Long-serving Nufarm managing director Doug Rathbone said the new structure places stronger focus on product innovation and portfolio development and will improve utilisation of assets.
Photo: Josh Robenstone

by
Tim Binsted

Crop protection group
Nufarm
plans to cut 105 jobs as part of a $13 million annual cost-saving bid that will see the closure of its Lytton and Welshpool manufacturing plants and several regional services centres over the next two years.

Two consecutive hot, dry seasons have hit Nufarm’s sales and wreaked havoc on earnings as margins are crimped by the high fixed cost base of Nufarm’s manufacturing, logistics and warehousing footprint.

In a conference call on Tuesday, the company said 105 of 673 staff in the Australian business will lose their jobs as part of the restructure. Long-serving Nufarm managing director Doug ­Rathbone said the staff cuts were ­significant but would not impede the ­company’s ability to compete.

“It is a relatively large number. About half of the positions are in the sites that are closing and the other half is in admin, and sales functions, some of which are duplicated internationally. Most of it is back office. We’ve been very careful not to impact our customer ­facing business," he said.

Related Quotes

Company Profile

PAC Partners analyst Paul Jensz said getting the cost base right is second in importance only to good relationships with customers and management of supply channels. “It’s probably one of the biggest cost-outs they have done. The growth in the Australian business is now a little lower risk with the cost base coming down," Mr Jensz said.

The $13 million of annual savings, which represents about 10 per cent of the total Australian cost base – is expected to flow through to Nufarm from fiscal 2016.

Nufarm will reorganise its ­Australian regional service centre and warehouse network, closing six of its 13 regional centres but retaining key sites in major cropping regions.

One analyst said this announcement could have happened years ago, and suggested the catalyst for the overhaul was last month’s executive reshuffle that put former Elders boss Greg Hunt in charge of the regional crop ­protection businesses.

A review of Nufarm’s New Zealand operations is ongoing. Nufarm group executive corporate strategy and ­external affairs Robert Reis said the company is going through a mandatory consultation period in New Zealand and talking to staff over the next month. The results of the New Zealand review are expected to be announced in April.

Last year, Nufarm’s Australian revenue plunged 14 per cent to $604.4 million while earnings dived 67 per cent to $35.4 million. Mr Rathbone said the poor seasonal conditions had exposed the high and inflexible cost base in the Australian business. “The Australian market is a low barrier to entry market and has become more competitive in recent years," he said. “This is about the long-term sustainability of the ­manufacturing base in Australia."

Nufarm subsequently called in Deloitte and specialist manufacturing and logistics consultancy D.Betts to help with an operational review.

Nufarm has been struggling to reinvent itself after a flood of low-cost ­Chinese glyphosate – a key ingredient in weedkiller – crashed the market in 2010 and Nufarm’s margins on glyphosate products from 30 per cent to 12 per cent.

In 2012-13, the company reported earnings before interest and tax ­margins in Australia of 19 per cent. The goal is to get EBIT margins up to around 23 per cent. Nufarm reports first-half earnings on March 26 and has guided the market to first-half EBIT of between $50 million and $55 million.

Nufarm shares rose 10¢ to $4 on Tuesday, giving the company a market value of $1.05 billion. Nufarm sells ­product into more than 100 countries and generated $2.3 billion in revenue in 2012-13.